Title GR No.

115381
Kilusang Mayo Uno v. Director-General Date: Dec 23, 1994
Ponente: KAPUNAN, J.

Nature of the case: What has been delegated cannot be delegated.

FACTS

1. DOTC Secretary Oscar Orbos issued a memorandum circular to then LTFRB Chairman Fernando allowing
provincial bus operators to charge passengers rates within a range of 15% above and 15% below the LTFRB
official rate for one year.
2. Private respondent Provincial Bus Operators Association of the Philippines (PBOAP) filed an application for fare
rate increase. An across-the-board increase of P0.085 per kilometer for all types of provincial buses with a
minimum-maximum fare range of fifteen (15%) percent over and below the proposed basic per kilometer fare
rate, with the said minimum-maximum fare range applying only to ordinary, first class and premium class buses
and a fifty-centavo (P0.50) minimum per kilometer fare for aircon buses, was sought.
3. Public respondent LTFRB granted the application of fare rate increase in accordance with the Straight
Computation Method.
4. DOTC Sec. Prado issued a Department Order, providing, among others, that “Passenger fares shall also be
deregulated, except for the lowest class of passenger service (normally third class passenger transport) for which
the government will fix indicative or reference fares. Operators of particular services may fix their own fares
within a range 15% above and below the indicative or reference rate.”
5. LTFRB, on the other hand, issued a memorandum circular promulgating the guidelines for the implementation of
DOTC Department Order, which provides, among others, the challenged portions:
* The presumption of public need for a service shall be deemed in favor of the applicant, while burden of
proving that there is no need for the proposed service shall be the oppositor(s).
The existing authorized fare range system of plus or minus 15 per cent for provincial buses and jeepneys shall
be widened to 20% and -25% limit in 1994 with the authorized fare to be replaced by an indicative or reference
rate as the basis for the expanded fare range
6. Sometime in March, 1994, private respondent PBOAP, availing itself of the deregulation policy of the DOTC
allowing provincial bus operators to collect plus 20% and minus 25% of the prescribed fare without first having
filed a petition for the purpose and without the benefit of a public hearing, announced a fare increase of twenty
(20%) percent of the existing fares.
7. Petitioner KMU filed a petition before the LTFRB opposing the upward adjustment of bus fares. It argued that the
authority given by LTFRB to provincial bus operators to set a fare range of plus or minus 15%, later increased to
plus or minus 25%, over and above the existing authorized fare without having to file a petition for the purpose, is
unconstitutional, invalid and illegal. It also contended that the establishment of a presumption of public need in
favor of an applicant for a proposed transport service without having to prove public necessity, is illegal for being
violative of the Public Service Act and the Rules of Court. The same was denied, hence this petition.
ISSUE/S
I. Whether or not the power of fixing the rates of public services may be delegated to private operators (NO)
II. Whether or not the shifting of the burden of proof is valid* (NO)
RATIO

1. No, the power of fixing rates may not be delegated. Respondent LTFRB was vested the power of fixing the rates
of public services by virtue of Sec 5© EO No. 202, which authorizes LTFRB to determine, prescribe, approve and
periodically review and adjust, reasonable fares, rates and other related charges, relative to the operation of
public land transportation services provided by motorized vehicles. Given the task of determining sensitive and
delicate matters for the transport sector, LTFRB is entrusted with the power of subordinate legislation. However,
nowhere under the aforesaid provisions of law are the regulatory bodies, the PSC and LTFRB alike, authorized
 to delegate that power to a common carrier, a transport operator, or other public service.

A further delegation of such power would indeed constitute a negation of the duty in violation of the trust
reposed in the delegate mandated to discharge it directly. The policy of allowing the provincial bus operators to
change and increase their fares would leave the riding public at the mercy of transport operators who may
increase fares every hour, every day, every month or every year, whenever it pleases them or whenever they
deem it "necessary" to do so.

Rate making/fixing is a delicate and sensitive government function that requires dexterity of judgment and sound
discretion with the settled goal of arriving at a just and reasonable rate acceptable to both the public utility and
the public. The rate should enable public utilities to generate revenues sufficient to cover operational costs and
provide reasonable return on the investments. On the other hand, a rate which is too high becomes
discriminatory, and contrary to public interest. A rate, therefore, must be reasonable and fair and must be
affordable to the end user who will utilize the services. Given the complexity of the nature of the function of rate-
fixing and its far-reaching effects on millions of commuters, government must not relinquish this important
function in favor of those who would benefit and profit from the industry. Neither should the requisite notice and
hearing be done away with. The people, represented by reputable oppositors, deserve to be given full
opportunity to be heard in their opposition to any fare increase.

2. No. The provision* is entirely incompatible and inconsistent with Section 16(c)(iii) of the Public Service Act which
requires that before a CPC will be issued, the applicant must prove by proper notice and hearing that the
operation of the public service proposed will promote public interest in a proper and suitable manner. On the
contrary, the policy guideline assailed states that the presumption of public need for a public service shall be
deemed in favor of the applicant. In case of conflict between a statute and an administrative order, the former
must prevail.

Public convenience and necessity exists when the proposed facility or service meets a reasonable want of the
public and supply a need which the existing facilities do not adequately supply. The existence or non-existence of
public convenience and necessity is therefore a question of fact that must be established by evidence, real and/or
testimonial; empirical data; statistics and such other means necessary, in a public hearing conducted for that
purpose. The object and purpose of such procedure, among other things, is to look out for, and protect, the
interests of both the public and the existing transport operators.

Verily, the power of a regulatory body to issue a CPC is founded on the condition that after full-dress hearing and
investigation, it shall find, as a fact, that the proposed operation is for the convenience of the public. Basic
convenience is the primary consideration for which a CPC is issued, and that fact alone must be consistently
borne in mind. Also, existing operators in subject routes must be given an opportunity to offer proof and oppose
the application. Therefore, an applicant must, at all times, be required to prove his capacity and capability to
furnish the service which he has undertaken to render. And all this will be possible only if a public hearing were
conducted for that purpose. the offending provisions of the LTFRB memorandum circular in question would in
effect amend the Rules of Court by adding another disputable presumption in the enumeration of 37
presumptions under Rule 131, Section 5 of the Rules of Court. Such usurpation of this Court's authority cannot be
countenanced as only this Court is mandated by law to promulgate rules concerning pleading, practice and
procedure.

RULING

Petition is GRANTED. The assailed department orders and circulars are hereby DECLARED contrary to law and invalid
insofar as they affect provisions therein (a) delegating to provincial bus and jeepney operators the authority to increase or
decrease the duly prescribed transportation fares; and (b) creating a presumption of public need for a service in favor of
the applicant for a certificate of public convenience and placing the burden of proving that there is no need for the
proposed service to the oppositor.
Additional Notes:
Requirements for Certificate of Public Convenience to be issued:
(i) the applicant must be a citizen of the Philippines, or a corporation or co-partnership, association or joint-stock company
constituted and organized under the laws of the Philippines, at least 60 per centum of its stock or paid-up capital must
belong entirely to citizens of the Philippines;
(ii) the applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident
to its operation; and
(iii) the applicant must prove that the operation of the public service proposed and the authorization to do business will
promote the public interest in a proper and suitable manner.